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Donald Trump won’t immediately terminate Nafta, says White House

LiveMint logoLiveMint 27-04-2017 Jennifer Jacobs

Washington: President Donald Trump won’t immediately terminate US participation in the North American Free Trade Agreement, the White House said, after he spoke with the leaders of Mexico and Canada about ways to renegotiate the accord.

“Both conversations were pleasant and productive. President Trump agreed not to terminate Nafta at this time and the leaders agreed to proceed swiftly, according to their required internal procedures, to enable the renegotiation of the Nafta deal to the benefit of all three countries,” the White House said in a statement.

Trump’s top advisers had been embroiled in a debate over how aggressively to proceed on reshaping US participation in Nafta, with hard-liners favouring a threatened withdrawal as soon as this week and others advocating for a more measured approach to reopening negotiations with Canada and Mexico.

Some of Trump’s advisers wanted a dramatic move before Trump’s 100th day in office on Saturday to fulfill a key campaign promise, while others said he could let the milestone pass and revisit the issue later through more formal procedures, according to two White House officials who spoke on condition of anonymity to discuss internal deliberations.

The dispute played out the media Wednesday, with several outlets saying Trump would take the most dramatic available step—issuing an order declaring his intention to withdraw from the treaty.

In this case, threatening to withdraw would have amounted to a formal step that started the process of giving Mexico and Canada six months notice that Trump intended to start negotiating.

Instead Trump is asking the two other nations to open talks on ways to make the deal more balanced from the US perspective, which is allowed within the framework of the treaty. Trump must give Congress 90 days notice that he seeks to renegotiate the accord.

The US could withdraw from the pact after giving six months notice to Canada and Mexico. Threatening to do so would signal to those countries the US is prepared to walk away, strengthening Trump’s hand in any negotiations. It also may backfire, leaving America without a deal if the parties can’t clinch a new one.

Even talk that Trump would revisit Nafta Wednesday caused Mexico’s peso, the Canadian dollar and shares of companies that rely on cross-border trade to plunge.

“Even if he notifies Mexico and the US of his intentions, that doesn’t mean he has to leave,” said Beatriz Leycegui, who was Mexico’s deputy minister on foreign trade between 2006 and 2011. “This is a strategy to bring pressure on Canada and Mexico.”

One of the questions facing White House aides is what steps are available to Trump at all, said the person familiar with the issue, such as what can be done under the confines of the law and according to rules dictated by the fast-track trade principles that govern such deals in Congress.

Commerce secretary Wilbur Ross said on Tuesday the administration is busy working with Congress to kick start renegotiation of the deal. He did say the US was embarking on a more muscular strategy for trade-enforcement.

Trump has blamed Nafta for hollowing out America’s manufacturing sector by relocating jobs to lower-cost Mexico—which his administration initially said was the main target of changes he was seeking to the accord.

Where Trump stands on Nafta is hard to discern. After harsh rhetoric during the campaign, he has in recent weeks toned down his criticism, suggesting the relationship with Canada only needs tweaking. But this week he fuelled trade tensions by imposing new duties on softwood lumber imports from Canada and vowing to defend US dairy farmers against quotas imposed in Canada.

A number of Republicans are strong backers of free trade and have cautioned the administration against walking away from the free-trade deal.

“Scrapping Nafta would be a disastrously bad idea,” Republican Senator Ben Sasse of Nebraska, who was a Trump critic during the campaign, said Wednesday in a statement. “It would hurt American families at the check-out, and it would cripple American producers in the field and the office.”

Republican Senator Jeff Flake of Arizona also blasted the idea on Twitter, writing, “Increasing trade barriers with CAN and MEX will result in lost jobs and higher consumer costs in #AZ. Strengthen #NAFTA, don’t abandon it.”

Without Nafta—which reduced or eliminated tariffs on most trade products after taking force in 1994 -- commerce ties between the nations would need to be reset, raising the specter of more frequent trade disputes and higher tariffs.

US trade with its Nafta partners has more than tripled since the agreement took effect, rising to $1.1 trillion last year. Canada followed by Mexico ranked as the two biggest markets for US exports, taking in a combined 34% of the total in 2016, according to a February paper published by the Congressional Research Service.

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